What Documents Do You Need for Mortgage Pre-Approval?

Mortgage pre-approval represents a crucial initial phase in the home-buying journey, providing a preliminary assessment from a lender of the amount they might lend. This step helps homebuyers understand their borrowing capacity and set a realistic budget. Securing pre-approval also signals to sellers that a buyer is serious and financially capable, streamlining the process when making an offer in a competitive housing market.

Verifying Your Income

Lenders require documentation to verify a borrower’s income, ensuring they have sufficient funds to manage mortgage payments. For most employed individuals, this begins with recent pay stubs, covering the last 30 to 60 days. These documents provide a snapshot of gross income, tax withholdings, deductions, and year-to-date earnings to confirm consistent employment and income.

Beyond recent pay stubs, lenders request W-2 forms from the past two years to confirm annual earnings and tax withholdings. Personal tax returns for the previous two years are often required, particularly if an applicant has complex income streams, is self-employed, or claims significant deductions. These returns offer a comprehensive overview of a borrower’s financial history and obligations.

For self-employed individuals, income verification requires a more detailed approach due to the variable nature of their earnings. Lenders ask for personal and business tax returns, including Schedule C and K-1s, for the last two years. Additionally, current year profit and loss statements, balance sheets, and business bank statements are necessary to demonstrate business viability and income consistency. Lenders prefer to see at least two years of consistent self-employment history.

Other income sources, such as Social Security benefits, pension income, disability payments, alimony, or child support, require documentation. Lenders need official award letters, recent bank statements showing regular deposits, or court orders to verify the amount and consistency of these funds. Providing all pages of these documents is a requirement to ensure a complete financial picture.

Confirming Your Assets

Demonstrating available funds for a down payment, closing costs, and financial reserves is another component of mortgage pre-approval. Lenders require recent bank statements, covering the last 60 days, for all checking and savings accounts. Provide all pages of these statements; any large, non-payroll deposits may require a written explanation for the source of funds.

Statements from investment accounts, such as brokerage accounts or mutual funds, are also requested. These documents help confirm additional financial resources. Retirement account statements, including 401(k)s and IRAs, are needed, especially if funds from these accounts are intended for the down payment or to demonstrate financial reserves.

If a portion of the down payment is a gift from a family member or another eligible donor, a gift letter is required. This letter must specify the amount of the gift, the donor’s relationship to the borrower, and state that no repayment is expected. Lenders also require documentation, such as bank statements, to verify the source of the gifted funds from the donor’s account. Ideally, gifted funds should be “seasoned” in the borrower’s account for at least 60 days prior to application to avoid additional scrutiny.

Assessing Your Debts and Credit History

Understanding a borrower’s existing debts and creditworthiness is important for lenders to calculate the debt-to-income (DTI) ratio and evaluate overall credit risk. Lenders will pull a credit report as part of pre-approval, so borrowers should be aware of their credit accounts, payment history, and public records. A credit score of at least 620 is recommended for conventional mortgages, with higher scores qualifying for better rates.

To confirm current financial obligations, lenders request recent statements for existing debts. This includes auto loans, student loans, and personal loans, which show current balances, minimum monthly payments, and payment history. Recent statements for all credit cards are needed for outstanding balances and minimum payments.

If a borrower owns other properties, a recent mortgage statement for each property is required. This helps the lender assess any existing housing-related debt and its impact on the borrower’s debt-to-income ratio. In instances where significant negative items appear on a credit report, such as bankruptcies or collections, the lender may ask for a written explanation and relevant discharge papers to understand the circumstances.

Additional Necessary Information

Beyond financial specifics, other documents are required to confirm identity and residency. A valid, unexpired government-issued photo identification, such as a driver’s license or passport, is needed to verify the applicant’s identity. This ensures the lender is processing the application for the correct individual.

The Social Security Number is a requirement, used for credit checks and identity verification. If the applicant’s current address is not clearly established by other submitted documents, proof of residency like recent utility bills or a current lease agreement may be requested.

For applicants who have experienced a divorce, providing a copy of the divorce decree is necessary. This document helps lenders understand any financial arrangements, such as alimony or child support payments received or paid, as these can significantly impact income or debt calculations.